U.S. Ranked No. 1 In Tech Competitiveness

Amid continued economic upheaval, is the U.S. losing its lead when it comes to IT innovation? Not according to the Economist Intelligence Unit, whose 2011 IT Industry Competitiveness Index shows the U.S. extending its lead over the 65 other countries in its biennial ranking.

The EIU study explores the proficiency of countries in six categories: overall business environment, IT infrastructure, human capital, R&D environment, legal environment, and support for IT industry development. The U.S. is No. 1 in all but two of those categories: IT infrastructure, where Switzerland is ranked first and the U.S. ninth, and legal environment, where the U.S. is second to Australia.

Among the other leaders in IT infrastructure are Denmark, the Netherlands, Sweden, and Australia; in human capital, China, Australia, South Korea, and the U.K.; in R&D environment, Israel, Taiwan, Finland, and Singapore; in legal environment, the Netherlands, Germany, and Denmark; and in support for IT industry development, Canada, Ireland, Singapore, and Norway.

While countries move up and down the overall ranking in each successive IT Industry Competitive Index, the top 20 countries have been relatively stable since the study's inception in 2007 "because of the solid competitive foundations they have built up through years of investment," according to the report. Notes Prof. David Hsu of the Wharton Business School in one of the interviews the EIU conducted for the report: "Advantage begets advantage."

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Only France and Belgium have fallen out of the top 20 since 2007, replaced by Austria and Hong Kong, says Robert Holleyman, CEO of the Business Software Alliance, a multinational IT industry group that commissions the EIU study. "There are no shortcuts to IT innovation," Holleyman said in an interview.

Unchanged from the 2009 report is the overall No. 1 ranking of the U.S. and No. 2 ranking of Finland, though the U.S. earned 1.6 more points to score an 80.5 while Finland dropped 1.6 points to 72. Rounding out the top 10 in the index are Singapore, up six positions; Sweden, down one; the U.K., up one; Denmark, up two; Canada, down three; Ireland, up three; Australia, down one; and the Netherlands, down five.

The most upwardly competitive countries are Malaysia, rising 11 spots to No. 31; India, up 10 to No. 34; and Singapore, up six to No. 3. The report attributes India's rise to its advances in human capital (plentiful, highly skilled and educated workers) and R&D (such factors as IT patent generation and private R&D spending). Malaysia gets higher marks for R&D, especially its patents, while Singapore's gains came across the board.

The biggest decliners in the index are three former Soviet republics: Lithuania, down 10 spots to No. 41; Russia, down eight spots to No. 46; and Kazakhstan, down six to No. 60. Russia and Lithuania get dinged for their intemperate R&D climates.

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After making "impressive headway" in the previous IT competitiveness ranking, China moved up only one position this year, to No. 38, "because of its poor record of protecting intellectual property rights," the report states. Even Canada, down three spots to No. 7, gets criticized for its less-than-stellar IP protection.

In an interesting sidebar titled "The Payoffs And Perils Of IT Industry Policy," the EIU authors call attention to South Korea, No. 19 on this year's ranking, down three spots from 2009. While noting that Korea's Ministry of the Knowledge Economy touts government-private sector collaboration as key to the country's success in mobile phones, semiconductors, and other tech areas, the EIU isn't so sure the government's heavy hand is always well placed. While the report's authors give the Korean government props for fostering the rollout of super-fast broadband networks and improving the country's education system, they criticize the government for protecting the country's huge tech conglomerates at the expense of more entrepreneurial companies, choking off innovation.

The report's conclusions, drawn from quantitative measures and qualitative perspectives, are strikingly similar to those of InformationWeek's Innovation Mandate research and report, published late last year. Both emphasize the correlation between the strength of a country's IT industry and its overall economic competitiveness; the gains Asia-Pacific countries are making relative to the West; Silicon Valley's continued place at the center of the IT universe because of its strong and constantly evolving innovation ecosystem; and the profound differences between a low-cost technology center and one focused on invention and true innovation.

And, both our report and the EIU agree, as the BSA's Holleyman notes, that the U.S. "can't rest on its laurels" as other countries make IT innovation a national priority. "This," he says, "is a real race to the top."

Rob Preston,
VP and Editor in Chief, InformationWeek
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